The oil industry hype machine
Buzz is building around a deposit of oil in Texas that some in the oil industry say is the largest deposit in the world. It's no surprise then that the industry is trotting out the America-as-the-new-Saudi-Arabia theme once again, Cobb writes, a theme that many have shown to be pure bunkum.
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A few reporters are starting to catch on to the pattern and including dissenting voices in their coverage.And, a just recently retired industry CEO has now said publicly that the shale gas and tight oil story is overblown. Mark Papa, former CEO of EOG Resources, which has extensive positions in both shale gas and tight oil, told Forbes recently: “The chances of the U.S. being independent in oil are very slim.” He added, "We’ve studied this from the rocks’ point of view. There’s a whole lot of plays that will have zero significance."Skip to next paragraph
Kurt Cobb is the author of the peak-oil-themed thriller, 'Prelude,' and a columnist for the Paris-based science news site Scitizen. He is a founding member of the Association for the Study of Peak Oil and Gas—USA, and he serves on the board of the Arthur Morgan Institute for Community Solutions. For more of his Resource Insights posts, click here.
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It's possible that Spraberry/Wolfcamp will turn out to be a very profitable venture for oil and gas companies with holdings there. Pioneer Natural Resources has already made a considerable sum by selling a 40 percent share to someone else. And, it's possible that even individual investors in wells may end up glad they invested. No one can know for certain. But all indications are that these investors should not base their decisions solely on the information coming from the industry.
Unfortunately, the public--which mistrusts the oil and gas industry almost universally--for some reason takes the industry's self-interested pronouncements about supply at face value. Perhaps this is because the public does not understand the true purpose behind these pronouncements.
Beyond the industry's desire to raise capital and sell off assets at a profit, the hype cycle aids industry trade groups such as the American Petroleum Institute (API) in propagating doubtful stories implying America is about to become energy independent. (The API has stopped making explicit statements on this subject which it knows are unsupported by the data. Instead, it keeps repeating the word "abundance" to give the impression that the country is or will soon be energy independent.)
The purpose of such stories is not particularly patriotic. Rather, these stories are designed to slow the transition to alternative energy sources by making such a transition seem far less urgent. In the process, the API is able to protect the value of its members' underground inventories of oil and natural gas, some of which might become stranded or at least less valuable in the event of a rapid transition to alternative energy.
As the reality of tight oil and shale gas sets in, even energy analysts--who so often parrot what the industry tells them--are starting to look skeptically at industry claims:
"Oil companies take production data from existing wells and extrapolate it over an entire field that might be millions of acres. And the oil business is rife with cases of fields that were the next big thing but ultimately produced nowhere near early estimates," said Benjamin Shattuck, an analyst with the energy research firm Wood Mackenzie.
If the analysts are finally looking skeptically at industry pronouncements, you should, too. Don't fall victim to the emerging hype cycle over Spraberry/Wolfcamp or the next cycle over something else, or the next one after that.
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